The Business Plan

J. Tol Broome Jr. -- Gifts & Decorative Accessories, 3/1/2001

One of the small-business owner's most overlooked management tools is the business plan. Not only is the business plan useful in obtaining capital, it also allows you to do valuable "big picture" thinking. Successful entrepreneurs not only maintain a business plan, they regularly revise it to adjust for changes in the market, personnel, and competition. In short, the business plan enables you to construct a blueprint of the direction in which your business is heading, how it will get there, and what it will look like when it arrives.

Retailers are often the least effective users of the business plan, particularly those who own only one or two locations. However, because of the many facets of running a successful gift store, proper business planning can have a significantly positive impact on your store's success. And if you are seeking outside capital for your operation, a business plan is a "must" component of the financing package.

Here are the ten key components of a sound business plan:

1. Executive Summary

Use the Executive Summary to "hit the high spots" of the business. This section should be concise (three pages or less) and provide a brief overview of the entire plan. Components include the purpose of the plan, background information about your store, its management, and its market, sales strategies, and a historical financial summary. It must also include the amount you are seeking and what you intend to do with it.

2. General Background of the Business

This section provides a brief history of your store and what differentiates it from your competitors. Focus on the nature of your business, its location, the customer base you serve, and the methods you use to meet your customers' needs. Include information about key personnel. Mention significant historical occurrences-such as a store expansion or a move to a new location-that have shaped the course of your business.

3. Management

This is the section in which you "toot your own horn." Include resumes of all key people in your organization. The emphasis here should be on the unique traits of your key people that contribute to the success of your business.

4. Products and Services

Outlining the products you offer is a bit more complicated than just saying, "I sell gifts." You also offer myriad accessories and services to your customers. Start by addressing the needs of your customers that you are meeting. Are you focusing more on the casual customer who comes in occasionally or the serious decorative accessories shopper looking to spend $500 or more each visit?

5. Marketing

For this section, answer the question, "How will I publicize my store to my customers?" This is one of the most troublesome planning areas for retailers. Your ad dollars are limited, but you've got to find creative ways to get the word out that you are there. You may decide that your current marketing strategy is exactly as you want it, but it won't hurt to go through the process to ensure that you are reaching your customers in the most productive way.

6. Operations

Here you want to address such areas as supplier relationships, methods you undertake to meet increased demand for certain items, and the procedures you follow to "keep the doors open" on a day-to-day basis.

7. Milestones

This is one of the key areas of the plan, because it is here that you do your short- and long-term planning. The idea is to establish measures of success that you can come back to at a later date and assess your performance. Some sample milestones might include achieving certain sales goals, opening another shop, adding employees, and cutting expenses.

8. Funds Required

If the purpose of your plan is to obtain outside funding, this section will be closely scrutinized by the prospective lender. You will need to review the amount of money you have already invested, other funds that you have utilized, and the amount you currently owe banks, vendors, and other creditors. Include a complete funding proposal that will demonstrate why you need the funds to make your business more profitable. A lender will look for:

• An explanation of why you need the money

• A specific plan for the use of the funds

• The proposed terms of repayment

• The collateral to be offered for the loan

• The source of repayment for the loan. (This is particularly important. Banks won't lend money unless they are confident that it will be repaid.)

9. Financial Info and Projections

Even if you are not a "numbers person," it is imperative that you include your historical financial performance and projections of future performance in your plan. In a nutshell, this will tell you where you have been and where you are heading. Analyzing past performance can give you insight into what you have done right to make your business work, as well as what you can do better to make it more successful.

Future projections are equally important. If you are preparing the business plan to obtain outside funding, be sure the projections are realistic. Investors and bankers look for no-nonsense numbers that are adequately backed up by reasonable assumptions.

10. Conclusion

Summarize the key strengths and weaknesses of your gift and decorative accessories business. If you are seeking outside capital, provide a synopsis of the funding request, summarizing the amount, uses, terms, and proposed conditions of the need.

Getting Help

If the financial area is not your bailiwick, seek help from your accountant or bookkeeper in preparing projections. Also, free counseling services are available through organizations such as SCORE (Service Corps of Retired Executives), small-business institutes, and small-business development centers. There are many good books on how to prepare a business plan, and many even offer sample business plans by which you can pattern your own.

J. Tol Broome Jr. is a credit risk manager at Centura Bank, Greensboro, North Carolina. His writing credits include Start Your Own Business , an Entrepreneur Magazine publication.